After yesterday's two-fer shocker, when the Treasury sold 3 and 6-month bills at the lowest Bid to Cover in a decade as demand for papers suddenly pulled away, today's 3Y coupon auction was no better, and moments ago some $34BN in 3 year paper was sold at a high yield of 2.765%, tailing the When Issued 2.763% by 0.2bps (the 5th consecutive tail in a row for this tenor), and the highest yield since May 2007.

The yield, however, was not enough to generate interest, and while the Bid to Cover rose from 2.51 last month to 2.65, but well below the 6 month average of 2.814, the internals were downright ugly, as Indirects took down just 42.7%, the lowest since December 2016, and with Directs taking 12.1%, it left Dealers taking down 45.2% of the auction, the highest share going back also to December 2016.

Overall, a very ugly auction, which better not be a harbinger of what to expect from tomorrow's benchmark 10Y sale or else the bond market may be facing a major hanogver very soon.